Retailers are scaling back investment plans after weak sales growth as expectations of sales weaken.
The sales balance from the Confederation of British Industry's (CBI) distributive trades survey published this morning dropped to 10 points in February from 16 in January.
Expectations of sales for the next month are at their lowest since May 2013. Investment intentions for the next year compared to the previous 12 months were negative with a score of minus four. It means more retailers were planning to cut back investment spending than raise it.
“Overall, conditions remain challenging for retailers. Although sales have continued to grow and optimism has risen, expectations for sales growth are lacklustre and retailers are still wary of investing. And unreformed business rates are making it tougher for retailers to open up new shops on the high street," said CBI director of economics Rain Newton-Smith.
“But retailers still stand to benefit from the low level of inflation and strong job creation across the economy, which should continue to support household spending.”
Howard Archer, chief economist at analysts IHS, said:
The fundamentals for consumer spending still look relatively heathy, with purchasing power decent and employment high and rising.
However it remains to be seen if mounting uncertainty ahead of the June referendum on EU membership causes consumers to become more careful in their spending.